Gravity Payments Owner Drastically Cuts $1M Salary and Sets $70,000 Minimum Wage for All Staff

Christian Post ^ | 04/15/2015 | Leonardo Blair

[fhayek]

Yes. His company, his money. I hope it works for him, but I can spot a few pitfalls a mile away. But who knows, maybe he can make it work. Either way, he succeeds or fails on his own initiatives. I only object to this kind of thing when government mandates this sort of thing.

[bjc]

I think most people are over-looking the nature of the business that this guy is in. This is a business with huge economies of scale in a very fragmented industry. He has now paid a couple of million for a massive amount of publicity, PR and goodwill. Even if Price is in the business for the long run, he can set his marketing guys loose and grow dramatically over the next couple of years, his margins will increase dramatically.

[bjc]

Henry Ford did a similar thing way back when IIRC. He raised wages ostensibly so that his workers could afford to buy his cars. It was a massive marketing success - with the added bonus of building loyalty and identity in a emerging business.

[Windflier]

...didn’t know that credit card processing could be so profitable.

I'm a contractor. About one in ten of my customers asks me if they can pay with a credit card. I tell them, "No, because the processing companies want 3% of the total transaction."

As a for-instance, I would have been hit for almost $50 in processing fees today, if my customer had paid with his credit card. With profit margins being as slim as they are in the trades today, there's no way in hell I'm gonna eat that.

[Svartalfiar]

Okay, so you’d take away their raise and then tell them you’re doing it for their own good and the eventual good of society?

Tell me you’re voting for Hillary, amiright?

Huh? How did I say that? I was merely pointing out that your 43k number is NOT their starting salary, but one guy, and there's several that make much less.

No, I wouldn't take away their raise, the market will likely do that when the company has to raise prices to cover such high pay and ends up unable to compete. I wouldn't have given them that raise in the first place. There is no way a 120-person company has every janitor or intern that is worth over $33/hr. (Likely plus other benefits!)

Yes, you can pay more than your competitors, and a 5-10% raise is good and makes more sense. But setting a $70k salary as a minimum for everyone is stupid. If you read my other post (50 I think), you'll see he's taking a huge hit. They'd be losing $400k per year if he hadn't also cut his own salary by $900k.

[MeganC]

The same things you’re saying of this man’s company were said when Henry Ford doubled wages for everyone working for him.

I’m curious, why are you so adamantly opposed to what this guy has done with his own money and his own company? That’s what’s really getting to me on this topic is the venomous reaction of so many FReepers to someone running his business the way he wants.

I thought that was something we celebrated on FR?

[Lizavetta]

The worst part about all of it is that $70,000. a year is NOT a lot of money any longer

True. But I live in Los Angeles and could very easily live on half of that. I'm just not a spender by nature.

[Svartalfiar]

I’m not opposed to what this guy does, it doesn’t affect me in any way. I just think he’s stupid. His reasons for doing this is because he read an article about some study that people are most happy when they make $75,000 a year. And maybe for publicity. But his employees can’t really produce more to justify (to me at least) the added expense. They take credit card fees.

Henry Ford raised wages for publicity, but also so his workers could afford to buy the product. And free marketing as more people drive them around. With a less diverse economy, and an actual product, it worked more in his favor as employees will work harder and actually produce more. It affected his bottom line and greatly increased production. While if I was Ford I probably wouldn’t have doubled wages, 20/20 shows that it worked. This may work out well for Gravity, and if so, good for him. I just doubt that it will.

[RipSawyer]

You must be single and own your home with no debt if you can figure out how to live in Los Angeles on $35000. My wife and I own home, vehicles etc. with no debt and we still can’t live on that in Eastern South Carolina and we are FAR from being “spenders by nature”. If a young man wanted to buy a home on a mortgage, get married and have his wife stay home and raise kids as people used to do he would have a struggle on a hundred thousand a year. If they wanted to have six kids and send them to school, even just through high school, as people used to do, a hundred grand would not suffice unless they home schooled and even then it would be very tough, sending them to public school is NOT an option and private schools are very expensive. Dental and medical would eat up an incredible sum.

[Lizavetta]

Single and divorced, kids grown and gone, renting a small place, 3K in credit card debt, 10K car loan. Dental discount plan, Obamacare (there is no other option for me, thanks to him).

[Lizavetta]

I've seen it first-hand, and it ain't pretty.

Please elaborate. I'm curious to know.

[Quality_Not_Quantity]

They’ll never find a job elsewhere at anywhere near that salary, so they have no choice but to do what the boss wants, including things like padding invoices, treating underlings badly, bribing customers, etc.

It’s great so long as you can figure out what it is that ‘makes the boss happy’ - problem is he would NEVER tell you what that was. If you were fortunate enough to find some activity that ‘pleased’ him, you were good. Rock the boat, and you would be instantly marginalized and ultimately fired.

[Lizavetta]

Thanks.